• Types of Transaction Structures

Our job at JB&A, as an M&A consultant, is to work with our client to identify an exit strategy. To be successful, we must carefully listen to our client’s financial and personal goals in a transaction. There are a multitude of strategic and private equity acquirers today with acquisition or investment dollars to spend. Below are examples of types of structures that are typical in today’s M&A climate.


  • Outright Purchase-An acquisition is the process wherein the stock or assets of a corporation are acquired by a purchaser. The transaction may take the form of a stock purchase or an asset purchase. The buyer would acquire 100% ownership of the company from a departing owner.

Asset Purchase: The acquired company transfers the assets of the business to the purchaser. These could include equipment, inventory and real estate, as well as intangible assets such as contract rights, leases, copyrights, patents, trademarks, etc. The acquired company executes the specific types of documents necessary to transfer the assets, such as deeds, bills of sale, and assignments. This type of transaction generally contains tax attributes favorable to the buyer.

Stock Purchase: The seller transfers the shares in the acquired corporation to the purchaser in exchange for an agreed-upon payment. A stock transaction is appropriate when tax costs, risk considerations or other issues surrounding an asset transaction make a stock sale more appealing to the parties.


  • Owner Recapitalization-A recapitalization provides for the owner(s) of the business to sell the assets or stock of the company to a private equity group. Simultaneously with the sale, a “new company” is created and the selling shareholders are then provided an opportunity to roll over a portion of the proceeds that were received from the sale and become stockholders in the new company. Tax laws provide, in some instances, that the money received from the sale of the company that is reinvested in the new company would not be taxable.

    A “recap” is an ideal alternative for an entrepreneur business owner who wishes to sell a portion of his/her company for liquidity or estate planning purposes, while retaining a significant equity position to participate in the ongoing company's upside. This structure allows the owner to achieve personal liquidity without sacrificing operating control of the company that the owner has painstakingly grown, while gaining a strong financial partner to assist with issues of strategic importance. In many cases, an owner's earning potential on the rolled-over equity is as much or more than the amount received in the initial "partial sale." In addition, a recapitalization eliminates all personal guarantees tied to the company. The financial partner or equity investor will also implement an incentive program to provide management and employees with the opportunity to participate in the equity upside generated by the company's growth strategy.

  • Management-Led Buyout- Incumbent management will partner with a financial partner, such as a private equity group arranged through JB&A to acquire the business they are currently operating. Sellers typically receive all cash; and management will invest a meaningful portion of the purchase price with the majority of the capital being provided by the private equity group. The financial partner or equity investor will also implement a compensation incentive program to reward management for profitably growing the business, both internally and through acquisitions.

  • Family Succession- Often this type of transaction involves backing certain members of family management in buying ownership from the senior generation or from outside shareholders. By working through JB&A in a family succession transaction, active family operators secure operating control and significant equity ownership while gaining a strong financial partner or equity investor.


Contact Information

Jerry Baker & Associates, Inc.

Telephone:  (913) 897-9199

Fax:  (913) 851-0678

Address: 13108 Linden Lane
       Leawood, Kansas 66209

Email: info@bakerandassoc.com

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Last modified: 02/01/10